Gary Owen Burgess v Susan Natalie Beaven

• Jurisdiction: New Zealand
• Judge: Heath J
• Judgment Date: 20 December 2010
• Neutral Citation: [2010] NZCA 625
• Docket Number: CA 371/2009
• Court: Court of Appeal
• Date: 20 December 2010

Between

Gary Owen Burgess

Appellant

and

Susan Natalie Beaven

Respondent

[2010] NZCA 625

Court:

Harrison, Wild and Heath JJ

CA 371/2009

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court decision which declined to make an order under s145A Land Transfer Act 1952 (early lapse of caveat against dealings) that a caveat not lapse — director of the respondent company had used fraudulently obtained funds from the appellant to purchase the properties — property purchased by a related entity with fraudulently obtained funds where properties were purchased at market value and then on-sold at a significantly higher price (funded by loans from the appellant) to front people — whether the respondent had purchased the property in good faith — whether a constructive trust existed over the property in favour of the appellant — ability to trace stolen money in equity.

Counsel:

G O Burgess, in person, Appellant

A M Corry for Respondent

JUDGMENT OF THE COURT

• A. The appeal is allowed and the declaration of unequal sharing of relationship property made in the Family Court's judgment of 30 June 2008 is set aside.

• B. Ms Beaven shall pay to Mr Burgess the sum of $22,000 within three calendar months of the date of this judgment.

• C. Ms Beaven is entitled to retain as her separate property the benefit of her post-separation dealings with Woodbury in terms of [50] of this judgment.

• D. Leave is reserved to apply to the Family Court, in terms of [51] of this judgment.

• E. No order as to costs.

REASONS OF THE COURT

(Given by Heath J)

Introduction

1 Mr Burgess and Ms Beaven married on 18 May 2002. They separated just over a year later, on 20 May 2003. Regrettably, nearly eight years on, despite their short marriage and few assets, relationship property proceedings remain unresolved.

2 On 3 June 2009, this Court granted an extension of time to apply and leave for Mr Burgess to appeal from a judgment given in the High Court at Christchurch on 27 November 2007. 1 The reason for allowing leave was a concern about the approach taken in the Family Court (upheld by the High Court) to assessment of the financial contributions of the marriage partners, in the context of a marriage of short duration. 2

The procedural history

3 The substantive relationship property proceeding was heard by Judge Strettell, in the Family Court at Christchurch. 3 Leaving to one side credits given to each party for post-separation contributions, the Judge considered that Ms Beaven's contributions to the marriage justified an unequal sharing of relationship property. Ms Beaven received 65 per cent and Mr Burgess 35 per cent.

4 Mr Burgess' appeal was heard by John Hansen J, in the High Court. 4 In effect, the Judge considered that $44,000 should be brought back into account for relationship property purposes. He found that a forgiveness of debt from Ms Beaven's mother had not (contrary to the Family Court Judge's view) been forgiven.

5 That finding required a sum of $40,000 to be brought back to account for relationship property purposes. 5 In addition, because the Judge also found that Ms Beaven used a sum of $4000 from the proceeds of sale of Mr Burgess' pre-marriage property to effect cancellation of a contract to acquire a re-locatable home for another property they were purchasing in North Canterbury, 6 a further adjustment was required. The Judge remitted the proceeding to the Family Court for “[reassessment of] the relative percentage contributions of the parties in the light of [his] judgment”. 7

6 On 30 June 2008, following receipt of written submissions, the Family Court delivered a second judgment. 8 While having regard, arithmetically, to the findings made by the High Court, 9 the Judge declined to reconsider any questions of valuation in respect of the relationship property in issue. 10

7 On reconsideration, Judge Strettell adjusted the percentages in which Mr Burgess and Ms Beaven were entitled to share in relationship property. The amended apportionment was 62 per cent (Ms Beaven) and 38 per cent (Mr Burgess). 11

8 Mr Burgess appealed against the second Family Court judgment, on the ground that the Judge was wrong not to enter into a reconsideration of valuation issues. That appeal was dismissed. 12 Fogarty J took the view that there was an issue estoppel created by the absence of any finding by John Hansen J that the Judge had erred in his approach to the valuation issue. On that basis, he held that Judge Strettell had been right to regard the valuation point as incapable of relitigation. 13

9 Because of Fogarty J's views, Mr Burgess sought an extension of time and leave to appeal against John Hansen J's judgment. He did not seek to challenge the judgment given by Fogarty J. In granting leave, this Court said:

[22] The effect of Judge Strettell's decision was to give the principal benefit of this price inflation over the period of the marriage to the respondent. (It will be recalled that the parties' non-financial contributions during the marriage were equal.) This result was achieved as a result of:

(a) the time at which the parties' financial contributions were assessed (one at the beginning of the marriage, one at the end); and

(b) the fact that the parties decided to sell the applicant's house and retain the respondent's house, rather than the other way round.

If the parties had chosen instead to retain [Mr Burgess'] house and to sell [Ms Beaven's] house, on the logic of Judge Strettell's reasoning [Mr Burgess] would have made the greater contribution. Such an analysis seems to us, arguably at least, to be wrong in principle, and to produce an unjust outcome.

The Court took the view that it was “strongly arguable that an injustice [had] been done”. 14

The relationship property

10 Although Mr Burgess suggested that he and Ms Beaven lived in a de facto relationship before their marriage, it is unnecessary to traverse that issue because it could have no material effect on the outcome of the appeal. We record Ms Beaven's denial of that allegation.

11 At the time of their marriage, Mr Burgess and Ms Beaven each owned properties in Christchurch. Mr Burgess' property was in Wychbury Street (Wychbury), while Ms Beaven's was in Woodbury Street (Woodbury). On their marriage, each of those properties were classified as relationship property. 15

12 Mr Burgess and Ms Beaven decided to pool their financial resources to purchase a property in North Canterbury. As both of them were involved in the

viticulture industry, they were interested in developing a vineyard. In July 2002, in furtherance of that joint goal, Mr Burgess sold Wychbury. The sale price was $129,500; as against a Government valuation as at September 2001 of $130,000. Taking into account repayment of a mortgage and other costs associated with sale, the net proceeds of sale were about $69,000. 16 Those proceeds were used to buy a property in Medbury, in North Canterbury (Medbury)

13 Medbury was purchased in August 2002, for $144,000. In addition to funds injected from the sale of Wychbury, a mortgage was obtained from SBS Bank, in the sum of $75,000. In addition, because Mr Burgess and Ms Beaven had registered as a partnership, for GST purposes, a refund of approximately $16,000 was obtained from that source. For the purposes of dividing relationship property, Judge Strettell valued Medbury at $252,000; a valuation fixed as at the date of the first Family Court hearing, in the early part of 2007, 17 about four years after separation.

14 At the time of purchase, Medbury was undeveloped. A caravan was put on the site. From time to time, when working on the property, Mr Burgess and Ms Beaven (or one of them) stayed in the caravan. For the balance of the time, they occupied Woodbury.

15 In September 2001, the Government valuation for the Woodbury property was $128,000. In March 2003, about two months before separation, Ms Beaven entered into an agreement to sell that property, for $160,000. Settlement was effected in June 2003, after separation. After discharge of debts and payment of costs of sale, Ms Beaven received a net sum of $156,642. In the absence of evidence to the contrary, the Family Court Judge found that any increase in value of that property, between marriage and separation, was due to inflation. 18

16 Initially, Ms Beaven invested the proceeds of sale. By September 2003, all but $36,400 was withdrawn, to enable Ms Beaven to acquire a property in Cranford

Street, Christchurch. That property was acquired in September 2003 and sold three years later, in November 2006, for $175,000. The net proceeds from sale of the Cranford Street property were $166,000. As a result, Ms Beaven received a capital gain of about $15,000 on sale of that property and retained the sum of $36,400 from the proceeds of sale of Woodbury

The first Family Court judgment

17 In his first judgment, Judge Strettell said: 19

[106] In summary, therefore, relationship property consists of the value of Medbury set at $252,000 plus stock and plant less liabilities, $196,534 nett, Cranford Street, $175,000, any additional balance sum received from the sale of Woodbury invested in the bank account together with interest to date, chattels and motor vehicles as agreed, the sum of $750 payable to reflect the respondent's use of $8000 bridging finance, the balance sum of $4050 to the extent it has not been repaid by the respondent post separation.

18 However, Judge Strettell considered there were factors favouring a (net) “sale price value” of Woodbury attaching to Ms Beaven's contributions, for s 14 purposes: 20

• a) There was no evidence to suggest Mr Burgess made any tangible contribution to the property which might have been reflected in...